With internet sales increasing every year, the city of Herculaneum is hoping to pass a use tax on internet sales to equal the tax brick-and-mortar businesses are already paying.
While most of the cities in Jefferson County have previously asked voters to pass the use tax, so far only Kimmswick, Crystal City and Byrnes Mill have voted in favor of the increase. Herculaneum city officials hope that offering a reduction in real estate and personal property taxes in tandem with the addition of the use tax will sweeten the deal into something Herculaneum residents can swallow.
The city will ask voters on the April ballot to approve Proposition U, which would allow the city to charge residents its 3.5-cent sales tax on internet purchases. And, if voters approve the use tax, the city would reduce the real estate and personal property taxes the city collects from residents by 10 percent.
The measure would require a simple majority vote to pass.
Herculaneum City Administrator Logan Jaskiewicz said the measure is about fairness and keeping up with how people shop today.
“Missouri already collects use tax on qualifying online purchases, this proposal would simply allow the city to receive its local share, just like it does when purchases are made in person. Supporting the use tax helps keep revenue local, protect service levels and maintain the city’s long-term financial stability,” Jaskiewicz said.
“The proposed use tax helps ensure that purchases made online are treated the same as purchases made locally. This keeps our local revenue structure fair and sustainable as more commerce continues to shift to online platforms.”
The city’s tax rate on personal property and real estate taxes in Herculaneum is .6303 per $100 assessed valuation. However, the total tax bill for residents depends on several factors, such as whether they reside in the Festus or Herculaneum school district and whether they are covered by the Dunklin Fire Protection District. Other taxing bodies include the state, the county, Jefferson College, the Joachim-Plattin Ambulance District and others.
The following is the ballot language the board approved for the April ballot: “Shall the City of Herculaneum impose a local use tax at the same rate as the total local sales tax rate, provided that if the local sales tax rate is reduced or raised by voter approval, the local use tax rate shall also be reduced or raised by the same action, and also total property tax levy, not including any debt service levy, on properties in the city shall be reduced annually by ten percent from the maximum authorized levy for that tax year beginning the year following the imposition of the use tax?”
The overall sales tax rate in Herculaneum is 9.85 cents per $1 spent. Of that, 4.225 cents goes to the state, 3.5 cents to the city, 1.625 cents to Jefferson County and one-half cent to the Joachim-Plattin Ambulance District.
Businesses within Herculaneum’s McNutt Road Corridor Community Improvement District (CID) charge an extra 1 percent higher sales tax than other parts of the city, coming in at 4.5 percent. Altogether, the overall sales tax rate in the CID is 10.85 cents per $1 spent.
Currently, when Herculaneum residents buy items online, they are charged state taxes, but they do not include the 3.5 percent city tax. City officials said adding the use tax will make prices at local brick-and-mortar stores more competitive with online shopping once they are on even ground taxwise.
Herculaneum Mayor Ryan Wright said the accompanying reduction in personal property and real estate taxes will lessen the burden on those with fixed incomes, such as the elderly, arguing that while residents can’t avoid housing costs, including real estate taxes, they can opt out of making unnecessary purchases if they can’t afford them.
Wright said he expects the reduction in personal property and real estate taxes revenue for the city to total approximately $120,000 annually and would increase in the future as more homes are built in the city. He said concrete numbers are not known on how much the use tax would bring in for the city, but some estimates are upwards of $550,000 per year once implemented.
